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Morneau Shepell reports 2020 results for the full year and the fourth quarter, announces intention to change name to LifeWorks
Corporate / Canada

Morneau Shepell reports 2020 results for the full year and the fourth quarter, announces intention to change name to LifeWorks

Full-year highlights

  • Revenue increased by 10.2 per cent to $979.2 million
  • Adjusted EBITDA increased by 9.6 per cent to $200.0 million
  • Record client satisfaction and employee engagement levels

Fourth-quarter highlights

  • Revenue increased to $249.6 million from $247.5 million
  • Adjusted EBITDA increased to $51.0 million from $48.0 million
  • Solid organic growth of 4.4 per cent

Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX:MSI) today reported its financial results for the full year 2020 and the fourth quarter ended December 31, 2020 (all amounts are in Canadian dollars, unless noted otherwise).

For the full year in 2020, revenue grew 10.2 per cent, or $90.3 million, to $979.2 million, with adjusted EBITDA increasing by 9.6 per cent to $200.0 million. Adjusted EBITDA margins were essentially flat at 20.4 per cent for the year.

“At a challenging time like no other, we delivered a solid year in 2020 that featured revenue and profitability growth, along with increases in organic revenue,” said Stephen Liptrap, President and Chief Executive Officer. “The ability of our people and systems to pivot to remote work quickly and productively was a key success factor, contributing to record client satisfaction and employee engagement levels. While in-person services were impacted in markets affected by lockdowns, there was a strong increase in demand for technology-enabled solutions across our core businesses, especially so in fast-growing wellbeing markets for digital health. Throughout the year, we strengthened our position as the global leader in the total wellbeing space and added 2.85 million people to our wellbeing platform.”

The Company’s 2020 performance met management expectations coming into 2020, despite the impact of COVID-19, producing solid performance in all geographic markets that included high single-digit growth outside Canada. “As COVID-19 became a reality, our clients came to rely on us more heavily to support their people through a very difficult time. So did governments and public health authorities that deployed our digital iCBT solution to help with the growing incidence of mental health issues related to the pandemic,” said Liptrap. “While we’re fortunate our business was and remains resilient, we’re proud that our solutions are being used to support community wellbeing. In fact, our iCBT business grew from $0.7 million to more than $8 million in 2020.”

For the fourth quarter of 2020, the Company produced revenues of $249.6 million, a 0.8 per cent increase, or $2.1 million, compared to the same period 2019, and organic growth of 4.4 per cent. Adjusted EBITDA increased 6.2 per cent, or $3.0 million, to $51.0 million, with adjusted EBITDA margins increasing to 20.4 per cent from 19.4 per cent. The factors in the Company’s improved quarterly performance included an increase in sales of technology-enabled wellbeing solutions, including 22.0 per cent organic growth in the quarter (14.2 per cent organic growth for the full year) for our Health and Productivity business, offset by a COVID-19-related decline in in-person services.

Today the Company announced its intention to change its name from Morneau Shepell Inc. to LifeWorks Inc. The decision follows an in-depth name evaluation process that included extensive market research with clients and prospects in Canada, United States, United Kingdom and Australia. The Company believes the proposed adoption of the new name will support its growth strategy in the global market for total wellbeing solutions.

“While the Morneau Shepell name has ably served our Company through many years of profitable market and geographic expansion, we believe our next stage of growth will require more focus on branding that the new name is intended to support,” said Liptrap. “LifeWorks, as a name, speaks directly to our motivating purpose as a business – improving lives, improving business – by emphasizing the idea that if you improve a person’s life, you’ll improve their performance at work. We’re excited to move forward under the LifeWorks brand, subject to Shareholder approval, all towards continuing to improve our own performance as a business in the years ahead.”

The proposed name change is being put forth to Shareholders as a Special Resolution at the Company’s Annual and Special Meeting of Shareholders on May 14, 2021. At that time, Shareholders will be asked to consider and, if deemed advisable, approve the Special Resolution concerning the proposed name change. The Company’s Board and Executive Leadership team unanimously recommend that Shareholders vote in favour of the proposed name change. More information about the Special Resolution will be available in the Company’s Management Information Circular.

Year-end/Q4 2020 Financial Review

In thousands of dollars, except per share amounts

Three months ended

December 31, 2020

Three months ended

December 31, 2019

Year ended

December 31, 2020

Year ended

December 31, 2019

Revenue

$249,644

$247,549

$979,162

$888,889

Adjusted EBITDA

$50,998

$48,041

$200,025

$182,453

Adjusted EBITDA margin

20.4%

19.4%

20.4%

20.5%

Adjusted EBITDA per share (basic)

$0.73

$0.72

$2.87

$2.76

Normalized Free Cash Flow

$22,964

$17,964

$101,154

$104,640

Profit

$10,828

$2,648

$55,924

$18,968

Earnings per share (basic)

$0.15

$0.04

$0.80

$0.29

Adjusted EBITDA per share (basic) for the year was $2.87, a 4.0 per cent increase compared to $2.76 per share in 2019, due to a higher adjusted EBITDA. The increase in adjusted EBITDA by 9.6 per cent to $200.0 million is due to organic growth and the mid-year 2019 acquisition of Mercer’s standalone, large market, health and defined benefit pension plan administration business, partially offset by the divestiture of our benefits consulting business earlier this year.

Profit for the year was $55.9 million compared to $19.0 million last year. The increase is primarily due to higher adjusted EBITDA and the gain recorded on business divestiture, partially offset by the sublease loss provision recorded in the third quarter of 2020.

Normalized Free Cash Flow for the year decreased by $3.4 million to $101.2 million compared to $104.6 million for the same period in 2019 primarily due to higher capital expenditures, partially offset by higher cash provided by operating activities.

The Company is maintaining its policy of paying a monthly dividend of 6.5 cents per share.

Annual Meeting of Shareholders
Morneau Shepell announced that it will hold its 2021 Annual Meeting of Shareholders on May 14, 2021, and it established a record date of March 23, 2021 for the meeting.

Notice of Conference Call
Management of Morneau Shepell will host a conference call on March 11, 10 a.m. Eastern Time. The conference call is open to all those wishing to attend, with a Question and Answer period with analysts to follow the presentation. To participate in the live conference call, please call 416.340.2217 (participant code 3047588) in the Toronto area, or 1.800.898.3989 (participant code 3047588) throughout the rest of Canada and in the United States. Media are invited to join on a listen-only basis.

A replay of the call will be available via the Morneau Shepell website at morneaushepell.com.

About Morneau Shepell Inc.
Morneau Shepell is a leading provider of technology-enabled HR services that deliver an integrated approach to employee wellbeing through our cloud-based platform. Our focus is providing world-class solutions to our clients to support the mental, physical, social and financial wellbeing of their people. By improving lives, we improve business. Our approach spans services in employee and family assistance, health and wellness, recognition, pension and benefits administration, retirement consulting, actuarial and investment services. Morneau Shepell employs approximately 6,000 employees who work with some 24,000 client organizations that use our services in more than 160 countries. Morneau Shepell is a publicly traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

Financial Measures
To assist investors in assessing the Company's financial performance, this news release also makes reference to certain financial measures such as Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA per share and Normalized Free Cash Flow. The Company believes that these are useful supplemental measures to assist our investors in assessing our financial performance. See the Company's MD&A for more details. These financial measures do not have any standard meaning prescribed by International Financial Reporting Standards and therefore may not be comparable to similar measures presented by other issuers.

(1) “Adjusted EBITDA" is defined as profit before finance costs, income tax expenses, depreciation, amortization, impairment losses, and certain unusual expenditures.

(2) “Adjusted EBITDA Margin” is defined as Adjusted EBITDA as a percentage of revenue.

(3) "Adjusted EBITDA per share” is defined as Adjusted EBITDA divided by the weighted average number of common shares.

(4) "Normalized Free Cash Flow" is defined as cash provided by operating activities, adjusted for changes in operating working capital, capital expenditures and certain unusual expenditures.

Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Use of words such as "may," "will," "expect," "believe," or other words of similar effect may indicate a "forward-looking" statement. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in the Company's publicly filed documents (available on SEDAR at sedar.com) and in the Company’s MD&A under the heading "Risks and Uncertainties." Those risks and uncertainties include ability to maintain profitability and manage growth, reliance on information systems and technology, reputational risk, dependence on key clients, reliance on key professionals and economic conditions. Many of these risks and uncertainties can affect the firm's actual results and could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statement made by the Company or on the firm's behalf. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

ID-CORP ID-IR

Heather MacDonald
media@morneaushepell.com
1-855-622-3327

Source: Morneau Shepell